Teacher Retirement System & Optional Retirement Plan
Teacher Retirement System of Texas
All benefits-eligible employees, excluding graduate students, are automatically enrolled in this program beginning on the first day of employment. The TRS plan is a traditional defined benefit state retirement program in which investment risks are generally absorbed by the state. Contributions go into a large trust fund that is managed by knowledgeable professionals with a prudent, yet successful, investment strategy. This type of plan provides stability and does not require any investment decisions by individual members. TRS members are also covered from the first day of membership by death and survivor benefits. Each pay period, the employer deducts from the paycheck of each participant an amount currently equal to 6.4% of the participant's eligible compensation for that period. These contributions are not subject to federal income tax withholding until ultimately distributed to the employee. The employer's matching contribution is equal to 6.644% of the participant's eligible compensation.
An employee who works less than 4½ months at 50% or more effort is considered temporary and earnings are not subject to TRS contributions. However, if the temporary employment is extended to exceed 4½ months, the employee becomes eligible for TRS membership.
Disability retirement benefits are provided for members who incur a permanent mental or physical disability that prevents them from further performance of duty. Members with at least 10 years of service credit who become disabled may receive a standard annuity (a minimum of $150 per month) or may select from among the payment options provided for service retirements. A disability retiree with less than 10 years of service credit at the time of disability receives $150 per month for a period of time equal to the number of months of service credit. All active members are covered by disability retirement provisions from the first day of membership. Members who apply for disability retirement after August 31, 2007, may be subject to an earnings limit.
TRS members are also covered from the first day of membership by death and survivor benefits. Designated beneficiaries of active members may choose one of five options under the death and survivor benefit, including a lump sum payment equal to twice the member’s annual salary, not to exceed $80,000. The designated beneficiary of a TRS retiree is entitled to receive a lump sum death benefit payment of $10,000 (or, for qualifying beneficiaries, a lump sum of $2,500 and a monthly payment of either $250 or, with a minor child, $350), in addition to any continuing annuity that may be payable under the retiree’s selected annuity option. If the total retirement annuity payments made to the retiree and any designated beneficiary are less than the balance in the member’s contribution account on the date of retirement, the excess contributions may be paid to the beneficiary.
Purchasing TRS Service Credit
A TRS member who has at least five years of TRS service credit may purchase one year of eligible out Website link TRS website.
Certain full-time faculty, librarians, professional and administrator positions employed in public higher education are eligible to elect ORP in lieu of TRS before the 91st day after becoming eligible. ORP is an individualized defined contribution plan in which each participant selects from a variety of investments offered by several companies (authorized by the employing institution) through annuity contracts or mutual fund investments. Because participants manage their own personal investment accounts, ORP entails more individual risk and responsibility than that associated with TRS membership.
Contributions to both programs are pre-tax through payroll deduction. With before-tax contributions, you pay no federal income taxes on your contributions, but you do pay taxes on your benefits when you receive them. Both the employee and the state make contributions to TRS and ORP based on percentages of the employee’s salary. The percentages are established by the Texas Legislature and may fluctuate over time. Employee contribution rates for September 1, 2007, through August 31, 2009, are 6.42 percent for TRS members and 6.65 percent for ORP participants. The state contribution rate for both plans is 6.58 percent.
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